Owens Corning bonds falter but bank debt holds; airlines fall on oil price rise

By Paul Deckelman and Sara Rosenberg

New York, April 1 - Owens Corning bonds were seen sharply lower Friday on a court decision putting the amount of contingent and unliquidated asbestos claims against the bankrupt Toledo, Ohio-based insulation maker at $7 billion.

Airline bonds were meanwhile weaker, as crude oil futures - a reliable leading indicator of the future cost of derivatives such as jet fuel - shot to a new all-time high above $57 a barrel.

Owens Corning's bonds such as its 7% notes due 2009 fell to 56 bid, 58 offered from prior levels at 66 bid, 68 offered.

A trader said that the bonds fell on the news that the company has some $7 billion of unresolved asbestos claims outstanding - well up from the previous estimate of $5 billion.

But while the bonds were down, as was the company's over-the-counter Bulletin Board-traded shares (down 28 cents, or 11.57%, to $2.14, on volume of 4.4 million, more than six times the usual turnover), its bank debt found some solid levels as the paper saw some trading activity for the first time in a little while, a trader said.

The bank debt was apparently buoyed by sentiment that the figure puts a maximum on the company's liability.

Owens' bank debt closed out the day at 107 bid, 108 offered but traded as low as 106 during the session following the emergence of the estimation buzz, the trader said.

Previously, the paper was thought to be somewhere in the 107 bid, 109 offered kind of picture - but with no activity actual levels were hard to determine, the debt trader added.

Bond traders said that the news was unique to Owens Corning, and they had seen little or no activity in the bonds of such bankrupt asbestos-challenged companies as Armstrong World Industries, USG Corp. and Federal-Mogul Corp.

Lancaster, Pa.-based floorcovering maker Armstrong's bonds were seen unchanged at 68. Chicago-based USG's 8½% notes due 2005 stayed around the 121 level and its 9¼% 2001 notes were unchanged at 131. Southfield, Mich.-based auto parts maker Federal Mogul's bonds continued to languish below 28

Mirant loans rise

Apart from Owens Corning, bank debt traders saw Mirant Corp.'s 2003 and 2004 paper up again, as the market as a whole felt better, with levels moving higher by about a point to 74.75 bid, 75.75 offered, according to a trader.

On Thursday, Mirant's bank debt had been up by about a point and a half in active trading with quotes closing out the day around 73.5 bid, 74.5 offered. The move during Thursday's session was also attributed to an overall better tone to the market.

In addition, the bankrupt Atlanta-based energy company's MAGI bank debt was up as well, with the paper moving higher by about a quarter to a half a point to 107.5 bid, 108.5 offered, the trader added.

Mirant's 7.40% corporate bonds due 2004 were seen unchanged around 77.5 bid, while its 7.90% notes held steady at 79.

Airlines hurt by oil

A strong upturn in world crude prices led to a downturn in the airline's issues. A trader saw American Airlines corporate parent AMR Corp.'s 9% notes due 2012 fall a point to 73.5 bid, 74.5 offered, while Northwest Airlines Corp.'s 2006 notes also lost a point at 84.5 bid, 85.5 offered.

But oddly, he saw the most battered non-bankrupt name in the sector - Delta Air Lines Inc. -hanging in there. He saw the 8.30% notes due 2029 at 31.5 bid, 32.5 offered, while its 7.70% notes due 2005 holding steady at 80 bid, 82 offered.

Commenting on the Delta bonds managing to hang tough, the trader asked rhetorically "how much lower can these bonds [the 2029s especially] go?"

Oil prices have been the battering ram that has driven the airline bonds lower over these past number of months, as the carrier's bottom lines have been decimated by escalating fuel costs. And on Friday they were at unprecedented levels.

Intraday prices for a barrel of light, sweet crude hit a new record, $57.70 a barrel on the New York Mercantile Exchange. May delivery crude settled at $57.27, up $1.87 on the day.

Muzak, Elan steady at lower levels

Back on the ground, Muzak Holdings LLC's bonds - which had turned sharply lower Thursday after the Fort Mill, S.C.-based recorded music company said that it would have to delay its 10-K annual report due to accounting issues that popped out - were doing "nothing," a trader said. He saw the 10% senior notes due 2009 at 83.625, while the 9 7/8% subordinated notes due 2009 were at 56.125, both essentially unchanged.

Another one of Thursday's big losers not seen much in the market on Friday was Elan Corp. plc, whose bonds had tumbled Thursday on news of yet another death linked to the Irish pharmaceutical company's new drug Tysabri.

In Friday's dealings, a trader saw its 7¼% notes due 2008 at 84 and its 7¾% notes due 2011 off half a point at 74.5, with "not even a dead-cat bounce."

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.